Loyalty KPI's
The LoyaltyLevers Balanced Scorecard overcomes the deficiencies of relying on any single indicator to measure loyalty program success. By focusing on each of the three Levers, and answering the underlying business questions for each, executives can have a full understanding of loyalty program performance.
Measuring Loyalty Program Effectiveness
Loyalty KPI's Program Engagement provides a leading indicator to performance. High and growing levels of engagement will lead to good things for loyalty sentiment and program ROI, whereas declining ratings will eventually result in performance decreases across the board. There are 5 dimensions to loyalty program engagement, including engagement with the program and individual benefits, engagement with communications and the website & app. Perhaps most important and elusive is creating and tracking advocacy, another key measure. Through a comprehensive analysis, available data is gathered for a minimum 3-year period, and scoring algorithms are developed in order to calculate loyalty program metrics.
Loyalty Program KPI: Loyalty Sentiment Lift
As loyalty encompasses both emotional connection and behavioral patterns, assessing emotional loyalty typically entails conducting surveys. The evaluation of customer loyalty comprises two key dimensions: Program Benefits and Member Affinity. When combined, these dimensions offer valuable insights into the effectiveness of the loyalty program and its influence on emotional loyalty.
Program Benefits encompass metrics such as Value, Ease, and a sense of Appreciation. On the other hand, the Member Affinity dimension delves deeper into crucial sentiments, focusing on the likelihood of maintaining current business, trying new products/services, and recommending the program to others. Additionally, a significant measure involves the extent to which customers are willing to inconvenience themselves to use a product or service. This willingness, whether it's traveling further to visit a retail store, waiting for a preferred service provider, or passing up a competitor's discount in favor of your brand, serves as a true indicator of customer loyalty.
Loyalty Program KPI: Margin Lift
Calculating ROI for Loyalty programs presents challenges in determining causality: does the program drive increased customer spending, or do already high-value customers simply find it worthwhile to participate? Recognizing this self-selection bias, the LoyaltyLevers methodology concentrates on assessing shifts in key metrics, utilizing these changes as the foundation for estimating the impact on profit margins.
Each Key Measure consists of over 10 individual metrics, aggregated using a customized weighting system tailored to each brand, surpassing traditional measures like customer retention KPIs. These measures are continuously monitored over time, offering insights into results across pre-defined test cases for various member segments. As the utilization of these Key Measures evolves, a clearer understanding of the relationship between improvements in the measures and diverse loyalty strategies emerges. Through an extensive test-and-learn initiative, targeting member segments with different treatments, a benchmark for the loyalty program performance is established—shedding light on what performance would look like without the loyalty program in place.
Pulling it All Together
The LoyaltyLevers Balanced Scorecard provides a comprehensive view of program performance. Of course, increasing Margin lift is a key goal, but a sole focus on this metric can lead to destructive changes that sacrifice long term prospects by removing benefits or shifting focus from program engagement. Within each of the primary KPI's, the individual scores provide strong diagnostic power, informing strategic and tactical decisions regarding rewards, benefits and communications.
